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Are Unicorns Really a Myth?

August 15, 2017
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Are Unicorns Really a Myth?

As we grew up, we eventually learned that unicorns are just a myth – well, not anymore! All you have to do is pick up the newspaper and scan the business section to read about “unicorns.”  This begs the question, “Why are business journalists talking about unicorns?”  “Unicorns” is actually a term, coined in 2009, for venture-backed companies valued at $1 billion or more in the private market.  So, again, it begs the question, “Are unicorns real or just a myth?”  Is this $1 billion valuation actually achievable for a startup company?

We value tech companies every day, from startups to more established companies.  Here are a few things that you can do to boost your chances of becoming a unicorn:

  • KNOW YOUR MARKET – A startup’s value is largely based on market forces in the industry in which it operates. That includes both the market forces in play today and future market forces.
  • FLAUNT MANAGEMENT’S SKILLS – A startup’s management team is its lifeblood. Nothing can overcome poor management, no matter how great of an idea the company may possess.
  • DON’T BURN THROUGH CASH – Unless you can fund operations from sustainable revenues, burn-out is always a real possibility. Startups that rely on investors to keep going will find that the investments eventually dry up.  Remember: added shares isn't good news for existing shareholders, so make sure your product will be able to stand on its own after its first few rounds of funding.  
  • KEEP CLEAN RECORDS – There will likely come a time when you are ready to sell your business. At that time, it will be extremely important that you have kept clean and concise accounting records, from the beginning. While startups might think it unnecessary to hire outside accountants from the get-go, it can save them a lot of money when the time comes to sell.

So, are unicorns really just a myth? I guess that depends on how you chose to live out your dreams.

By Jennifer Cohen, CFA, Manager